Banks cannot charge different loan rates for individuals, based on the neighborhood the home is located in. What is this practice called?

The practice of charging different loan rates based on the neighborhood in which a home is located is known as redlining. This term refers specifically to the discriminatory practice where banks and other financial institutions use geographic data to deny services, such as lending, to individuals in certain areas, often predominantly inhabited by minority groups. This practice impacts the ability of residents in these neighborhoods to obtain loans on fair and equal terms, contributing to systemic inequalities in access to housing and financial services.

Redlining not only limits access to credit but also reinforces patterns of segregation and economic disadvantage. It has been widely criticized and is illegal under various fair housing and anti-discrimination laws. Understanding this term is crucial for individuals in real estate and finance, as there are significant legal and ethical implications associated with such discriminatory practices.